The Last of the Titans
They are sons of strong women. Both have sparred publicly with their heirs, both are plotting to conquer China, and both seem to view immortality as their best succession plan.
But what really unites Viacom Inc. Chairman Sumner M. Redstone and News Corp. Chairman Rupert Murdoch is that, to a degree almost unknown today among heads of U.S. public companies, they can do as they please.
Redstone and Murdoch are part of a line of autocratic media titans stretching to CNN founder Ted Turner, William S. Paley of CBS, Henry Luce of Time Inc., newspaper baron William Randolph Hearst and such lions of early Hollywood as Louis B. Mayer and Adolph Zukor. Their power derives not just from their dominant stakes in the companies they’ve built but also from their inclination to use it.
“The amazing thing is that when Rupert says ‘Let’s do it,’ everyone drops everything to focus on whatever he wants,” said one News Corp. executive. “It’s like an army that can turn on a dime.”
Today, as the digital revolution is overturning old-media business models and new threats and opportunities are materializing at video-game speed, a leader’s ability to act boldly and unilaterally -- without having to consult lawyers, directors or Wall Street in advance -- can be a powerful advantage.
In fact, when Murdoch decided to make his move into new media, he didn’t order up strategic studies but took the company checkbook in hand and spent $2 billion on acquisitions, sometimes holding talks without keeping even his top executives in the loop.
“There’s a huge difference between executives who rise up through the ranks versus a founder-executive in terms of personality and style,” said Lilli R. Friedland, a psychologist in Century City who advises business executives on strategies, collaborative skills and succession issues.
Because these individuals are excruciatingly possessive about what they’ve built, she said, they can never let go, even in their waning years.
“I am Viacom,” Redstone, 83, said in a recent interview. “My life is Viacom and it continues to be Viacom. I live the company that I built from three drive-in theaters,” a business he inherited from his father. He controls about 70% of the voting shares of Viacom and of CBS Corp., which were split apart in January.
Redstone’s latest display of owner’s prerogative came this month, when he abruptly fired Viacom Chief Executive Tom Freston, the 26-year cable veteran he’d chosen less than a year earlier to run the company after the CBS split. The Freston ouster came two weeks after Redstone had publicly cut ties between Viacom’s Paramount Pictures and its top movie star, Tom Cruise, saying Cruise’s erratic behavior was costing the company money.
Both actions show that Redstone “wants to raise his profile and show he’s in command,” said Neal Gabler, who has written extensively about Hollywood and is a panelist on News Corp.'s Fox News Watch.
In defiance of his age, Redstone shows the kind of restless energy that an Olympic athlete might envy. What drives him, those who know him say, is a competitive fire that gets kindled by such things as his rivalry with Murdoch, 75.
In one sense, theirs is like the rivalry between San Francisco and Los Angeles: It irritates San Franciscans, while Angelenos pretend it doesn’t exist.
Certainly Redstone is more likely to mention his opponent, as he did this month when he railed in an interview about News Corp.'s $580-million purchase a year ago of the wildly popular Internet hangout MySpace.com. “We could have had the thing for $500 million had we moved in before Murdoch thought about it,” Redstone said, implicitly blaming Freston for dropping the ball.
If Redstone’s name seldom escapes Murdoch’s lips, that doesn’t mean he’s not paying attention. In the MySpace deal, News Corp. burst in with a preemptive offer after learning that Viacom was in discussions, keeping one of the hottest names on the Internet from hooking up with his rival’s most powerful franchise, the youth-oriented MTV Networks. The deal was done in record time: one month, start to finish, according to people who worked on it.
Murdoch trumped Redstone again months later. Viacom executives were so close to signing a deal last September to buy San Francisco-based IGN Entertainment Inc., which runs video-game websites, that they had scheduled a victory dinner. Murdoch and his top lieutenants staged a stealth attack, signing a $650-million purchase agreement the night the Viacom dinner was to be held, according to two people involved.
“People have said that [Murdoch] takes gambles more easily than I do, but I’m not sure that’s true,” Redstone said. “I would say we’re very much alike.”
Entrepreneurs once were as plentiful in entertainment as they are today in Silicon Valley. But as the business has matured and consolidated, empire builders such as Ted Turner and cartoon king Haim Saban have sold their creations, mostly to the media giants left standing, Viacom and News Corp., as well as Walt Disney Co. and Time Warner Inc.
Murdoch seldom grants interviews and was not available to comment for this article, a spokesman said. Redstone, however, talks freely with the press and seems to care deeply what is written about him.
Both men passionately want to succeed in the vast consumer market of China -- Murdoch with satellite TV and Redstone with his cable TV programming and Paramount movies. Doing business in China requires extensive personal dealings with government officials.
A businessman who has observed both men with foreign officials described how they responded to questions on sensitive issues such as censorship and business dealings.
“Sumner gives an answer right away,” said the executive, who requested anonymity because of the delicacy of the talks. “He says either yes or no. It’s almost an impulsive response. He has a strong opinion.”
It’s different with Murdoch. “He pauses, and his answers are long and complicated,” the businessman said. “You feel like he is saying important things, but at the end of his answer you don’t have any idea about his opinion. He hedges everything.”
Murdoch’s reserve can strike some as deviousness.
One investor who admires Murdoch recalled visiting him at one of his London newspapers that was the subject of union protests. After the meeting, the investor was prepared to call a cab, but Murdoch politely offered his limousine. The investor realized he was being used as a decoy when the limo was mobbed by picketers, and he imagined Murdoch slipping out of the building unnoticed.
Redstone grew up in Boston and graduated first in his class from Boston Latin School, the city’s premier public high school. Finishing behind Redstone was the late Merton H. Miller, who won the Nobel Memorial Prize in Economic Sciences in 1990. Redstone went on to Harvard, finishing in three years.
“My mother had one dedication in her life, which was my education,” Redstone wrote of Belle Redstone in his autobiography, “A Passion to Win.” “There was only one No. 1 and that had to be me.”
Redstone was aided in his studies, and later as a federal prosecutor and a businessman, by formidable powers of concentration and a near-photographic memory. A favorite Redstone debating tactic is to recite his opponents’ words back to them in perfect detail weeks or months after they were spoken. “It was really unnerving,” said a former Viacom executive.
Redstone seems to thrive on adversity. In 1979, he survived a fire at Boston’s Copley Plaza hotel by hanging on to a window ledge, suffering severe burns that left his right hand mangled and his legs with such poor circulation that he is forced to wear support hose to this day. He likes to say the biggest milestones of his career -- his purchases of Viacom, Paramount Pictures Corp. and CBS Corp. -- occurred after that fire.
Critics of Redstone’s business vision say he is more opportunistic than strategic, gravitating toward certain deals because they are available rather than because they fit with an overarching plan. “I think Rupert is a better businessman,” said media investor Morris Mark, whose Mark Partners owns 700,000 shares of News Corp. and none of Viacom. He described Viacom as “mature,” growing at 5% to 8% annually, while News Corp. could grow at a rate of 12% to 18%. “And that is a big reflection of the men at the top,” Mark said.
Of the Viacom-CBS split, Mark said: “Redstone is so concerned about the cost of the stock, he made a short-term decision. He’s impatient.”
One cost of the move is that CBS CEO Leslie Moonves, whom Mark envisions as the ideal Viacom CEO, “is now the one guy Sumner can’t pick to run that company.”
Redstone said the split would prove successful over time. He also made no apologies for his Wall Street orientation.
“I’m very sensitive to shareholders,” he said. “If somebody buys our stock, it’s a vote of confidence, and we have an obligation to provide for that shareholder.”
Murdoch, by consensus, pays far less attention to Wall Street, although his ownership stake -- about 30% -- is less dominant than Redstone’s.
“He thinks News Corp. isn’t a public company as much as it’s his company,” said Bill Mechanic, former head of Murdoch’s 20th Century Fox studio and now CEO of Pandemonium Films. “He thinks he knows more than everybody else.”
Money manager Lawrence J. Haverty Jr. of Gabelli Asset Management put a more positive spin on that attribute, calling Murdoch “the most long-term manager I’ve ever seen. He thinks on a five-, 10- or 20-year horizon.” Murdoch, he said, “has been willing to suffer enormous financial pain to get where he thinks he needs to go.”
Murdoch has often been scoffed at for overpaying, as in 1994, when his Fox broadcast network bid $1.58 billion for four years of NFL games, reportedly topping CBS’ offer by $400 million and knocking its older rival out of pro football for the first time in 40 years. The move paid off, though, as America’s most popular TV sport gave Fox legitimacy as a major network. Wall Street has gradually come to respect Murdoch’s batting average, although Haverty said he believed News Corp. still carried a “Rupert discount” because “there’s always one more mega-deal on the horizon.”
Investors worry about the future of News Corp. and Viacom management. Murdoch has nurtured strong executives such as his No. 2, Peter Chernin, but has been vague about his succession plan. He has said his children will inherit the company but that the board will pick a successor when he dies.
Perhaps Murdoch is planning on living as long as his mother, Elisabeth Murdoch, who is 97. She had sent the young Rupert to boarding school “to toughen him up a bit.” After the sudden death in 1952 of his father, Keith Murdoch, Rupert, then a newspaper reporter, returned from England to his native Australia to take over the family business, which was chiefly the Adelaide newspaper the News.
His eldest son, Lachlan, left the company last year after a dispute with his father over inheritance. Lachlan also accused his father of undermining his authority.
Redstone has said his daughter, Shari, will succeed him one day but until then will hold a non-executive post at Viacom and CBS. Redstone’s son Brent, who has no role at Viacom, sued his father last year in an attempt to cash out his stake in the family’s privately owned National Amusements Inc.
The day he announced Freston’s firing, Redstone joked about what might happen to the company after he departed “20 or 30 years from now.” Some aren’t sure he was kidding.
“Sumner really doesn’t think he’s going to die,” a longtime associate said. Redstone recently told a reporter he’d started the day with a soy shake with strawberries, blueberries and green tea, followed by a lunch of steamed spinach, broccoli, Brussels sprouts and squash.
“It’s all rich in antioxidants,” Redstone said. “And there is a new fruit from the Himalayas called gojo that extends your life. I eat plenty of that.”
Said Nell Minow, head of Corporate Library, a governance research firm: “The problem with leaders like that is that they kill off the young bucks that are coming up and don’t leave a good environment for succession. They definitely do not go gently into that good night.”